| could be approved as early as this week
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Posted on 02/22/2005 7:00:01 PM PST by Golden Eagle
The U.S. government is close to completing its investigation into Lenovo Group Ltd.'s $1.7 billion acquisition of IBM Corp.'s computer division, sources close to the matter said. The companies are negotiating with federal regulators to foreclose any national security concerns over their deal, which could be approved as early as this week, a source said. Under its deadline to review the deal, the Committee on Foreign Investments in the United States, a multiagency panel that reviews acquisitions of U.S. businesses by foreign companies, must decide by mid-March whether to approve the transaction.
Sources close to Armonk, N.Y.-based IBM and Beijing-based Lenovo said the companies are seeking to allay CFIUS concerns centering on research and development activities at IBM facilities in Research Triangle Park in Raleigh, N.C. Lenovo is majority-owned by Legend Group Holdings Co., which is controlled by the Chinese government.
(Excerpt) Read more at thedeal.com ...
I expected as much from Clinton, but not Bush.
Ping
This article doesn't say, but once it was kicked into a formal investigation I believe the President does have to make the final decision. Unfortunately, IBM's lobbyists seem to be winning the battle.
I'd like to see the sale go to a US company or group of investors, if they're intent on selling a $10 Billion dollar/year company for $2 Billion, but the story is IBM turned down other offers because their future vision is one of even greater cooperation with these Chinese government fronts.
Tech security / business ping
| could be approved as early as this week
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Sure, its revenue is quite high, but IBM's pc division has consistently LOST money recently.
Let's hope Bush will stand up to block the deal. If he doesn't, he runs the risk of looking hypocritical by recently requesting the EU limit their trade with China on security grounds, while approving this one despite objections voiced by Republican Congressmen over similar concerns.
This is far from a done deal, and even if approved, don't expect my concerns to magically disappear. This could be something we regret for a very long time, especially if it's a watershed event where more Chinese fronts start buying more US icons.
They are not buying an icon, they are buying a piece of the IBM pie. And a pretty small piece at that from recent sales data. As far as security concerns, were not talking supercomputer stealth technology here. Most of the components that go into a majority of PC's sold in this country are already built by the ChiComms. That's not to say that I agree with helping them out in any way though, just make some more valid arguments.
Actually, the just recently available profit reports for 2004 showed IBM PC with a profit, although that news has been greatly suppressed recently. However here's one story on Business Week:
It's a perfect time for the Chinese to enter the market in such a huge way, with the uncertainty at HP after the Fiorina firing, and we also have an increasing demand for PC's worldwide right now:
The lone possible bright spot, if the deal is approved, is that many large corporate customers may turn their nose on the new IBM/China partnership. From Merrill Lynch:
And reports from Dell:
Although a small piece of the pie, it is the part of the pie ordinary Americans have most tangible contact with.
I mean, the word 'IBM' rings a picture of a PC first in anyone's mind, and to sell away that picture, in my opinion, is the beginning of the end for IBM.
Not only has the IBM PC division been turning a profit recently (see the post I just added with a link to Business Week), the Chinese are using PC's to build supercomputers, in fact they use the Linux software that has recently been strengthened by IBM's contributions to the "free" software to build a supercomputer that registered in the top 10 in the world, a Chinese first.
Instead of criticising me for supposedly not knowing what I'm talking about, how about pulling the wool off your eyes instead?
I hope so, I'm sickened by all the US corporations shacking up with the communist Chinese government. But this one seems to take the cake.
http://www.freerepublic.com/focus/f-news/1300424/posts
IBM sought a China partnership, not just a sale
In July 2003, Sam Palmisano, the chief executive of IBM, traveled to Beijing to explore the sale of the company's personal computer business. But he did not start by making the usual visit with executives of IBM's preferred partner, Lenovo, China's largest personal computer maker. Instead, Palmisano first engaged in a bit of old-fashioned courtship. Before formally approaching Lenovo, he sought permission from the parents, by meeting privately with a senior Chinese government official in charge of economic and technology policy.
IBM was not merely looking to sell its PC business, Palmisano told the official, but had bigger aspirations of creating a global enterprise, with IBM contributing technology, management, marketing and distribution.
The idea, Palmisano explained, would be to build a modern and truly international Chinese-owned corporation. The move, he added, would demonstrate China's desire to take that next step toward economic maturity by investing abroad instead of merely serving as a manufacturing hub for the rest of the world.
There were other interested bidders, including one from an American buyout firm whose offer remained on the table until the end. And the Lenovo deal could have fallen apart. But apparently the Chinese option was the only one seriously pursued by IBM.
As I stated at the end of my post, I do not think this sale is a good thing in that it helps the ChiComms. This is something I oppose in principle.
So, is IBM selling China high encryption algorithms? are they selling them a means to build weapons that the EU is planning on selling to them? I don't think so. And that was my point. If I had the time, and a couple of million dollars, I could build a supercomputer myself with a good beowulf cluster of IBM Power PC's. And I'm just an average citizen. They are not selling them anything they couldn't achieve or haven't achieved on their own technologically. Another fact is that much of their PC sales is bulstered by their sales of the IBM Thinkpad, a laptop, which as far as I know will not be part of this package. I believe the reason for that is the fact that it uses some very strong hardware based encryption on their hard drives. So, IBM is not selling this country's security out with this deal. The President wouldn't be selling this country's security out with this deal. It is just basically wrong that an American Icon would even consider selling a very high profile part of their business to the ChiComms. That is what has got my goat, and probably yours too. But, instead of just saying that, you have delved into attempting to make this out to be more than what it is. At most it would be an attack upon our economy, albeit a small one. At the least it is a form of capitulation to the ChiComms for future business by both IBM and the Administration.
Ok, GE, I read the article you linked to. It makes no reference to IBM's contribution to Linux, an Operating System built by a Finish, and mostly optimized and upgraded by the open source community. Yes it is true that IBM has made contributions to the Linux Kernel, but nothing that could be construed as a security breach. Especially in light of the fact that anyone on Earth can have access to even the most recent kernel. Their are highly secure versions of the kernel, but these are not due to encryption but to configuration and therefore again do not fall under any security concerns. So, one more time. If you are against this business deal, I agree with you, but come up with a more valid argument.
This deal is purely an economic one for IBM. It is getting in bed with the Communists to make them richer and thus more apt to purchase IBM products in the future. Ask Bill Gates about getting in bed with the ChiComms. He used to sell loads of Windows distributions, but that dried up as soon as the ChiComms locked him out and pirated his software to the tune of 90% of users using an illicit version of Windows. Now the Chinese are publicizing a crackdown on pirated software that is nothing more than a PR stunt. The ChiComms want to get their grubby little hands on American technology to copy it and undersell us, not to build any kind of lasting business relationships. Good luck IBM, hope the dry bottom of the plunge doesn't hurt too much.
IBM is the originator of the "PC", and their quality of engineering and breakthrough design is legendary. That's why they have since their beginning been the premier PC company, that as everyone knows was able to successfully charge premier prices. It's not Chinese junk, it's the best engineered PC's with the highest R&D budget and greatest number of patents.
Combined with China's main PC company, it gives China not only the IBM name (for a while), but gives them the 3rd largest PC company in the world. And with HP's troubles, who currently sit at number 2, they could quickly be overtaken.
What IBM is essentially trying to do, is not only give the Chinese the highest quality PC engineers and manufacturing facilities in the world, but put them on the threshold of taking over the industry. And this is the Chinese government we're talking about, not a group of investors, but a communist controlled entity.
Their is a huge difference between outright handing over of American Missle technology and the PC division of IBM of which most components are already built in China.
Thank you GE. That was the argument I was looking for. and I hope you read the part of my post that referred to an economic attack. You have hit the nail on the head. This is the threat we will surely deal with in this arrangement. I am glad you have put the real nuts on the table to be cracked. I think any help to the ChiComms is an attack on us, one that the ChiComms plan on taking full advantage of. But, remember that IBM's PC division, outside of their Thinkpad brand, is stagnant and has been for some time. HP has made their own bed and regardless of this deal must lie in it. The deal with the ChiComms may hamper HP, but they aren't going to go silently. You must remember that much of IBM's PC business is in the the industies of governement and defense. Those entities are not going to buy a product that is owned by the ChiComms. I would hope. I may be wrong, but I could only hope.
Most of the complex advancements such as symetric multiprocessing and memory handling come straight from IBM, who has hundreds of programmers dedicated to increasing Linux productivity. All in all, IBM has invested billions into Linux, and without Linux, China woudln't be cracking the top 10 in worldwide supercomputers. You may choose to look the other way, but I see it as no small coincidence that Linux's growth in popularity has been directly related to IBM's investment. They just pledged another $100 million last week.
I can't access the full article, but front page blurb at thedeal.com now says - "Lenovo is likely to be asked to move its operations so as not to have access to intellectual property at the IBM campus."
You're welcome, no one knows that point any more than I, not only have I previously recommended IBM products be purchased by my customers, I have a significant personal investment in their products myself. I feel totally betrayed by their recent actions, and repulsed by the comments of Palmisano above.
However I'm also repulsed by IBM turning their back on genuine Unix and porting Unix features to the foreign clone Linux, the result being countless foreign fakes that now steal US software sales, and propel the most powerful computers in communist dictatorships. The Chinese take Red Hat Linux, and rename it "Red Flag", all supposedly legal, and for free, and to the delight of those in China and other parts of the world. Without the state of the art contributions of US corporations led by IBM, China would have very little interest in Linux.
http://www.thedeal.com/NASApp/cs/ContentServer?pagename=hpa&c=TDDArticle&cid=1107993072317&p=M4YD5AR1
Part of the dispute between government regulators and the companies involves the timing for when Lenovo will move its newly acquired PC division from IBM's campus to another location in the research park. CFIUS is concerned that Lenovo employees could use the PC unit facility on the campus to conduct industrial espionage at other IBM facilities, some of which have conducted research for the Department of Defense.
CFIUS officials and the companies have tentatively agreed on a phased withdrawal of Lenovo employees to another location in the park over the next six months to two years, sources close to the situation said.
"The bottom line is that the Lenovo plant will be off the IBM campus," a source said.
At the Raleigh campus, IBM houses in separate buildings units focused on enterprise software, servers, technology sales and consulting.
Michael Wessel, a member of the U.S.-China Economic and Security Review Commission, a quasigovernmental panel that monitors trade with China, warned that moving Lenovo's PC division away from IBM's facilities is not certain to resolve security concerns. He said Lenovo's Research Triangle Park center will operate in close proximity to roughly 100 technology companies and numerous nonprofit research organizations, many of which are involved in developing new technologies. The park is a public and private research industrial zone created in 1959 by business and academic leaders.
"The Chinese are trying to acquire a lot of technology and intellectual property, and the possibility for them to gather that information at the park is great," Wessel said.
For instance, the nonprofit MCNC Inc. organization in the park develops sophisticated networking and security encryption technology used in defense applications, among other functions.
"A lot of research that goes on in this area is developed specifically for Department of Defense use," a source said.
Now this would be a threat to our security. Kind of changes the angle of the whole argument GE. Thanks for opening my eyes on this one.
I'm completely confused why you seem to agree on principle, but are unable to tie the ends together that China being sold the most sophisticated PC operations in the world wouldn't advance their desire to fully exploit PC capability. They already cracked the top 10 supercomputer clusters by using PC clones, it seems obvious to me than could now reach even greater heights using superior IBM PC technology, not only now but likely in the future as IBM has promised to continue to support them in every possible way.
You have touched on deeper issues than just the economic impact this sale could impose on U.S. technology corporations. The outright handing out of top level system and application development technology that IBM has been doing for some time is much more threatening. Maybe this is the issue the Senators should be focusing on, and take away their precious sale as a slap on the hand for being so irresponsible.
Check one of the links I provided above, where US congressmen have recently considered limiting export of PC technology. The "cat" is obviously somewhat out of the bag, but if sold the IBM PC corporation, they essentially are getting the king of the jungle.
Yes, there are multiple concerns, including espionage. Maybe I should formulate them into bullet form, but I must now log off. Glad to have made your acquaintance.
This is something I would definitely want to keep my eyes on. If you find anything new, ping me please.
Very well said. I was falling asleep last night and missed this excellent analysis.
This is something I would definitely want to keep my eyes on. If you find anything new, ping me please.
Sure will, thanks.
"But a newer approach, in which numerous low-end Linux systems are connected with a high-speed network into a high-performance computing cluster, means supercomputers can be built from widespread, ordinary technology."
That approach was developed at NASA and given away for free - it's called Beowulf clustering.
They obviously should have thought of the repurcusions before giving it away then. NSA gives away improvements our US tax dollars developed to the world for free too, with SE Linux. Doesn't make any of it right.
It looks like the deal may not go down after all.For years the Chinese government fretted that the US was using its technology lead to spy on the country - but now the tables are turned. The US government has much deeper concerns about what China can glean from the historic Lenovo-IBM PC deal than recent reports have indicated.
Concessions offered by IBM to the US Treasury's Committee on Foreign Investment in the United States were rejected yesterday, Bloomberg reports. The Committee is worried that IBM's North Carolina facility presents opportunities for industrial espionage. Even the IBM customer list - and the US government is a very big customer indeed - could divulge information the US doesn't want China to see.<
And keeping this list private is one of the concessions apparently made by IBM. (Although how Lenovo can support IBM government staff if it doesn't know who or where they are isn't clear.) Another concession includes prohibiting Lenovo employees from certain buildings. IBM had been asked not to transfer R&D staff to the facility, but rejected the suggestion. The Committee has until March 14 to file its report to the President.
In the late 1990s the PRC was worried that domestic CDMA networks were vulnerable to US political interference, as they use the DoD's GPS satellites to synchronize their base stations. However, a source told your reporter that Chinese government officials didn't object to monitoring of traffic on the ill-fated Iridium network.
Anyone over 40, perhaps. Ask the average teenager about 'IBM' and you will probably get a blank stare.
Thanks, I wish I could believe it, but according to the Bloomberg article IBM is greasing the palms of Bush family friends like Brent Scowcroft to help make sure it gets approved.
http://quote.bloomberg.com/apps/news?pid=10000006&sid=aFS_xmsQouLQ
From the looks of the lobby list, IBM is willing to pay whatever it takes to push this thing through.
Not only that, but China would become the first OEM with GSP access to Windows source code... not just the OEM builds. Just think of what you could do with total control of both hardware and software.
Is there anyone at Microsoft who monitors the OEMs to make sure that they're building/selling systems with no unauthorized patches?
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Well, you wanted the government to look into it. Now they have.